Aju Press - Asia News Hub

Journalist

Kim Yeon-jae김연재

ReporterBank of Korea & Market, Macroeconomics

Kim Yeon-jae is a journalist at AJU Press (AJP's English platform),
covering macroeconomics, international finance, and geopolitics.
He closely tracks central bank monetary policies, global energy supply chains,
and the Korean defense industry. "Peering into the risks behind the euphoria."

Latest by Kim Yeon-jae

Korea's 2026 excess tax revenue seen topping 50 tln won SEOUL, September 27 (AJP) — South Korea is expected to collect more than 50 trillion won ($36.8 billion) in excess tax revenue this year, pushing annual tax receipts to a record, said government officials. The Ministry of Finance and Economy is preparing to release a revised 2026 tax revenue estimate at the end of September, with annual receipts seen above 465.4 trillion won. The projection would put tax revenue more than 50 trillion won above the 415.4 trillion won target set in April's supplementary budget and exceed the previous record of 395.9 trillion won in 2022. Tax revenue reached 274 trillion won in the first seven months of the year, up 41.4 trillion won from a year earlier, according to ministry data released last month. The collection rate against the supplementary budget target stood at 66.0 percent, compared with the five-year average of 63.5 percent. Corporate tax revenue rose 4.4 trillion won from a year earlier to 51.8 trillion won through July, before interim payments by companies with December fiscal year-ends were reflected in the figures. Those companies file interim corporate tax payments based on first-half earnings in August, with larger payments allowed to be made in installments through September. Samsung Electronics and SK hynix posted combined first-half operating profit of nearly 245 trillion won, putting their interim corporate tax payments in focus for the August and September revenue figures. Officials reported that the government sees the interim payments from semiconductor companies as a key factor supporting its latest revenue estimate. This year's excess revenue could also be added to the government's planned Future Response Fund, although the amount to be transferred has not been decided. The fund has a separate 162.3 trillion won revenue base from projected 2027 domestic tax receipts exceeding their 10-year trend. Adding at least 50 trillion won from this year's excess revenue would bring potential fund resources to 212.3 trillion won, before other possible sources, although the government has not decided whether to transfer the full amount. Under the 2027 budget proposal, 45.4 trillion won from the fund would be invested in youth, growth engines, regional development and education and talent, while 12.5 trillion won would be used to reduce new government bond issuance. A decision on how to use this year's excess revenue will be made after the revised tax estimate is released and following discussions within the Ministry of Planning and Budget and consultations with Cheong Wa Dae and the finance ministry, Minister of Planning and Budget Park Hong-keun said on Sept. 17. AJP Takeaways - South Korea's 2026 tax revenue is expected to exceed 465.4 trillion won, with excess revenue topping 50 trillion won and annual receipts surpassing the previous record set in 2022. - The Ministry of Finance and Economy is preparing a revised tax revenue estimate for the end of September, with interim corporate tax payments from major semiconductor companies expected to support August and September collections. - The Future Response Fund has a separate 162.3 trillion won revenue base for 2027, while adding at least 50 trillion won from this year's excess revenue could lift potential resources to 212.3 trillion won if the government decides to transfer the money. 2026-09-27 08:24:41
Chuseok cash circulates as more flows back to banks SEOUL, September 23 (AJP) — Cash remains abundant in South Korea, where the economy is running at its strongest pace since the pandemic. But more of that money appears to be making its way back into the banking system before it can circulate for long in everyday spending. The Bank of Korea said Wednesday that net currency issuance over the 10 business days through Sept. 23 totaled 3.6451 trillion won ($2.70 billion), down 792.3 billion won from a year earlier, mainly because the Chuseok holiday shortened to four days from seven. “Almost everything here is paid in cash or by bank transfer,” said Kang Myung-ja, who runs a food business at Namdaemun Market in central Seoul. Chuseok, Korea's autumn harvest holiday, is one of the country's biggest annual holidays, when families traditionally travel to their hometowns, shop for food and gifts and give cash to younger relatives. Net currency issuance refers to cash supplied by the central bank to financial institutions minus currency returned to the BOK. Compared with 2024, when the Chuseok break lasted five days, gross currency issuance was little changed at 3.9436 trillion won this year, versus 3.9138 trillion won. Currency returned to the BOK, however, jumped 78.6 percent to 298.5 billion won from 167.1 billion won. The shift extends beyond the holiday period. From June through August, 5.63 trillion won in currency was returned to the central bank, up 82.7 percent from 3.08 trillion won during the same period last year. Currency issuance over the three months fell 33.9 percent to 4.23 trillion won from 6.40 trillion won, turning net issuance to a negative 1.39 trillion won from a positive 3.32 trillion won a year earlier. At Namdaemun, Kang said the cash passing through her business rarely stays in the till overnight. “Once I finish for the day and the cash box fills up, I take the money straight to the bank and deposit it,” she said. “Otherwise there is too much cash to keep around, and it gets in the way of running the business.” The rise in returned currency does not mean physical cash itself is disappearing. Currency outstanding stood at 215.86 trillion won at the end of August, up about 6.5 percent from 202.66 trillion won a year earlier. Of the total, 195.4 trillion won was held in 50,000-won notes. What is changing more clearly is where money is being parked once it enters the banking system. Bank time deposits increased by 20.3 trillion won in August after surging 42.3 trillion won in July, according to the BOK's latest financial market data. The central bank said household funds shifted back into time deposits in August, while demand deposits and other accounts that can be withdrawn readily fell by 14 trillion won after an 80.8 trillion-won decline in July. Higher deposit rates have strengthened the incentive to lock money away. The average rate on newly handled savings deposits at banks rose to 3.21 percent in July from 2.51 percent a year earlier, while the rate on new one-year time deposits climbed to 3.48 percent from 2.52 percent. Kang said higher rates were among the reasons she preferred deposits for money she did not immediately need. “With rates higher and no obvious place to grow the money, I would rather put it into savings or a time deposit and let it grow safely,” she said. The national figures do not trace individual banknotes and do not show that currency returned to the BOK went directly into time deposits. They do, however, show two trends occurring at the same time: sharply higher currency returns to the central bank and a strong increase in money flowing into time deposits as banks offer higher rates. A similar pattern emerged among shoppers at Namdaemun. Kim Yoo-hyun said she had withdrawn cash ahead of a trip to her hometown of Changwon in southeastern Korea to give money to younger relatives during Chuseok. “For me, cash is basically for two things — shopping at traditional markets and giving money to family members,” Kim said. “The family gifts probably account for more because we have a very large family.” Her boyfriend, Kim Joon-hong, said he had not withdrawn cash specifically for the holiday and usually pays by card or Samsung Pay, but still uses cash when visiting traditional markets. Both said money they receive in cash now tends to move into savings rather than remain available for everyday spending. “Almost all of it goes into savings,” Kim Yoo-hyun said, adding that recent stock-market volatility had made her less willing to keep spare money invested in equities. Kim Joon-hong said he had made a similar shift toward savings products. A commercial bank employee in central Seoul, who requested anonymity because the employee was not authorized to speak publicly, said cash withdrawals at the branch still rise sharply before Chuseok. The employee estimated that withdrawals can reach at least three times ordinary levels around the holiday, although the seasonal increase has eased somewhat compared with roughly a decade ago. Pre-Chuseok net currency issuance rose in 2025 even as electronic and mobile payments continued to expand, while the BOK cited the shorter holiday as the main reason for this year's drop. At Namdaemun, cash still changed hands across market counters and was withdrawn for family gifts. What appears to be changing is what happens afterward. More cash is returning quickly through the banking system, while higher-yielding savings and time deposits are drawing in funds that might otherwise have remained immediately available for spending. AJP Takeaways - South Korea's net currency issuance ahead of Chuseok fell 17.9 percent to 3.6451 trillion won, with the BOK citing the shorter holiday as the main reason. - Currency returned to the BOK from June through August jumped 82.7 percent from a year earlier, turning net issuance negative over the three months. - Bank time deposits rose 20.3 trillion won in August after a 42.3 trillion-won increase in July, while newly offered deposit rates also rose. - Cash itself has not disappeared: currency outstanding rose 6.5 percent from a year earlier, while traditional-market purchases and holiday cash gifts continued to generate seasonal demand. 2026-09-23 17:07:47
OECD lifts Korea growth outlook to 3.7%, ADB to 3.2% on AI chip boom SEOUL, September 23 (AJP) -Two major international institutions sharply raised South Korea's growth forecasts on Wednesday as booming AI-related semiconductor exports and stronger production pushed the economy well beyond expectations from just a few months ago. The Organisation for Economic Co-operation and Development (OECD) lifted its 2026 growth forecast for South Korea to 3.7 percent from 2.6 percent in June, a 1.1 percentage-point upgrade. The Asian Development Bank (ADB), in a separate outlook released the same day, raised its forecast to 3.2 percent from 2.6 percent in July. The revisions reinforce a widening consensus that South Korea's semiconductor-led expansion is proving considerably stronger than expected, although the OECD also warned that higher energy prices are adding to inflationary pressure. The OECD's 3.7 percent projection is higher than forecasts from the Bank of Korea at 3.3 percent, the Korea Development Institute and ADB at 3.2 percent, Moody's at 3.5 percent and the South Korean government's 3.0 percent estimate. It is closer to some of the more bullish projections from major investment banks, including JPMorgan at 3.8 percent, Citi at 3.7 percent and Bank of America at 3.6 percent. The OECD also raised its forecast for South Korean growth in 2027 to 2.6 percent from 1.9 percent in June. It said strong exports and production were driving growth this year, with a gradual recovery in consumption expected to continue into next year. South Korea recorded the largest upward revision among Group of 20 economies in both the OECD's June and September outlooks for 2026. Its 2027 projection also received the biggest upgrade in the latest round, according to the ministry of finance in Seoul. The ADB's revision pointed in the same direction. The Manila-based bank raised South Korea's 2026 growth forecast by 0.6 percentage point to 3.2 percent, its second consecutive upward revision after lifting the estimate from 1.9 percent in April. The 3.2 percent projection is the ADB's highest forecast for South Korea since 2021, when its September outlook projected 4.0 percent growth. Its forecasts for the country between 2022 and 2025 did not exceed 3.0 percent. The ADB cited stronger-than-expected manufacturing activity in July and August, including firm purchasing managers' and business sentiment indicators. Exports have benefited from rising global demand for AI-related semiconductor chips, while expansionary fiscal policy and robust corporate earnings are expected to support a gradual recovery in private consumption. The ADB also raised its 2027 growth forecast for South Korea to 2.3 percent from 2.0 percent. The two institutions differed more clearly on inflation. The OECD raised its 2026 inflation forecast for South Korea to 3.0 percent from 2.6 percent in June and lifted its 2027 projection to 2.7 percent from 2.2 percent. The revisions reflected both the stronger growth outlook and expectations that international energy prices will remain higher than assumed three months earlier. The ADB, by contrast, kept its 2026 inflation forecast unchanged at 2.7 percent, although it also cited high global energy prices and stronger domestic demand as sources of continuing price pressure. It expects inflation to ease to 2.2 percent in 2027 as energy-price pressures diminish and tighter monetary conditions work through the economy. The OECD cited persistent energy-price increases, weather-related supply shocks including El Niño and a further rise in long-term government bond yields as downside risks to the global economy. An earlier end to the Middle East conflict could provide upside. It also said broader adoption of artificial intelligence could boost investment and production further, while cautioning over profitability at AI-related companies and their reliance on high leverage. The ADB cited heightened geopolitical tensions, volatility in global financial markets and the possibility of additional U.S. tariff increases as risks that could weaken South Korean exports and investment. For the global economy, the OECD raised its 2026 growth forecast by 0.1 percentage point to 2.9 percent while trimming its 2027 estimate by the same amount to 3.0 percent. The ADB raised its forecast for developing Asia and the Pacific to 5.0 percent from 4.9 percent and maintained its 2027 projection at 5.1 percent. AJP Takeaways -The OECD raised South Korea's 2026 growth forecast by 1.1 percentage points to 3.7 percent, while the ADB lifted its estimate to 3.2 percent, underscoring a broad repricing of the country's growth outlook. - Both institutions cited strong exports and AI-related semiconductor demand, with the OECD's forecast now above estimates from the BOK, government, KDI and ADB. - Inflation remains the counterweight to faster growth: the OECD raised its 2026 inflation forecast to 3.0 percent, while the ADB kept its estimate at 2.7 percent amid elevated energy and geopolitical risks. 2026-09-23 13:55:53
Korea's consumer sentiment rebounds as income hopes outweigh rate concerns SEOUL, September 23 (AJP) - Consumer sentiment in South Korea remained solid in September as expectations for higher income outweighed concerns over a heavier debt burden from back-to-back rate hikes and a stagnant stock market, according to central bank data. The Composite Consumer Sentiment Index (CCSI) rose 2.1 points from August to 106.6, its biggest monthly gain since May, the Bank of Korea (BOK) said Wednesday. The rebound followed a 2.3-point decline in August that ended three consecutive monthly increases. September’s reading returned to its June level, when the stock rally was at its peak. The BOK attributed the recovery to reduced stock-market volatility, favorable economic conditions and stronger household income expectations. The survey was conducted from Sept. 9 to 16. A CCSI reading above 100 means consumers are more optimistic than the long-term average, while a reading below 100 indicates greater pessimism. The household income outlook rose 2 points to 102 and contributed 0.9 point to the headline index, the most among its six components. The BOK cited expectations that stronger economic growth would lift household incomes. Perceptions of current living conditions showed no improvement, with the index unchanged at 92. The outlook for living conditions rose 1 point to 98, while consumer spending expectations increased 1 point to 110. Consumers also became less pessimistic about the broader economy. The index measuring current economic conditions jumped 4 points to 83, the largest increase among the six CCSI components. The BOK cited continued strength in exports and consumption alongside reduced stock-market volatility. The outlook for future economic conditions edged up 1 point to 90, while the employment outlook gained 2 points to 88. Interest-rate expectations climbed 3 points to 128, their highest level this year and sharply above January’s reading of 104. Housing price expectations held at 125 for a second month. The BOK said continued gains in apartment prices in the Seoul metropolitan area were offset by government housing measures and the Aug. 27 base-rate increase. Inflation expectations also remained steady. Consumers expected prices to rise 2.7 percent over the coming year, unchanged for a third consecutive month. Expectations three and five years ahead both held at 2.6 percent. Petroleum products were the most frequently cited source of inflationary pressure, selected by 52.7 percent of respondents, up 2.5 percentage points from August. The survey covered 2,500 urban households nationwide, with 2,226 responding. AJP Takeaways - Consumer sentiment posted its biggest monthly gain since May as stronger income expectations outweighed concerns over borrowing costs. - The household income outlook improved to 102, but perceptions of current living conditions remained unchanged at 92. - One-year inflation expectations held at 2.7 percent for a third month, while interest-rate expectations reached their highest level this year. 2026-09-23 07:54:08
Korea's export boom meets a leaner Chuseok table SEOUL, September 22 (AJP) - Chuseok, South Korea’s Thanksgiving holiday and one of the country’s biggest occasions for family gatherings, is around the corner, but the mood is hardly celebratory. "The holiday is shorter this year, and it looks like many are skipping this year. The business is not good," said a wholesaler at Garak Market in southern Seoul. "The fruit prices are horrific. Instead of a box of pears, I bought only a couple for the jaesa (a food table to pay respect to ancestors)," said 72-year-old Kim Yoo-jeong, a Seoul resident. Exports are on course to reach the $1 trillion milestone, and the economy is enjoying a semiconductor-led boom. But in grocery shops and around dinner tables, the abundance is not widely shared. The gap presents a difficult judgment for policymakers. How much tightening can households bear when the growth and wage figures supporting higher interest rates reflect gains many have yet to receive? September consumer sentiment data due Wednesday will offer another measure of that divide as the Bank of Korea weighs further rate increases. A weaker reading would sharpen the tension between responding to inflationary pressure in the broader economy and adding to the strain on household budgets. The survey will be the first since the BOK raised its base rate by 25 basis points to 3 percent on Aug. 27, its second consecutive increase. Consumer sentiment softened in August but remained above 100, indicating greater optimism than its long-term average. The case for tightening rests partly on the strength of the headline numbers. Exports surged 68.7 percent in August from a year earlier, led by record semiconductor shipments. Consumer prices rose 3.1 percent, while the central bank has cited the risk of wage gains feeding into demand and prices in arguing for preemptive rate increases. Yet the wage figures show how unevenly that purchasing power is distributed. Average monthly pay for regular employees, excluding overtime payments, rose 3.1 percent in the first half from a year earlier to 4.318 million won, according to a Korea Enterprises Federation analysis of Labor Ministry data released Sunday. Growth in fixed monthly pay slowed to 2.2 percent. Special payments, including performance bonuses, rose 9.3 percent to a monthly average of 601,000 won, the highest level since 2011. Much of the windfall was concentrated in electronics and telecommunications manufacturing, which includes the semiconductor industry. Average monthly pay in the sector jumped 23.1 percent to 9.434 million won, with special payments surging 66 percent. Its roughly 377,000 workers accounted for just 2.5 percent of the workforce covered by the analysis, but the sector generated 32.4 percent of the overall increase in special payments. Excluding the sector, average monthly pay rose just 2.2 percent to 4.187 million won, which can partly explain why everything feels so expensive as the gain falls below the annual inflation rate. The benefits of stronger nominal growth have yet to spread evenly across household income, BOK Deputy Governor Jang Jeong-su admitted Tuesday. Borrowing costs can rise before those benefits arrive. Further rate increases could add to repayment difficulties and delinquency risks for vulnerable borrowers before the benefits of slower debt growth emerge, Lim Kwang-kyu, director general of the BOK’s Financial Stability Department, said Tuesday. A 25-basis-point increase would add about 7 trillion won ($5.1 billion) to the combined interest burden on households and companies, Lim said. Vulnerable households and smaller companies tend to feel the effects sooner than borrowers overall, according to the central bank’s analysis. For families preparing for Chuseok, the immediate pressure is at the checkout. The government has responded with record discount subsidies and increased supplies of holiday staples. Support for discounts on domestic agricultural and livestock products has nearly tripled to 149 billion won from 50 billion won last year. The Korea Agro-Fisheries & Food Trade Corp.’s survey across 22 regions put the cost of a traditional ancestral offering table 1.5 percent below last year’s level. A separate Seoul Agro-Fisheries & Food Corp. survey found an average increase of 5.1 percent. The Agriculture Ministry has itself acknowledged the risk of excessive discounts stimulating additional demand. It reduced the discount rate on agricultural and livestock product vouchers to 20 percent from 30 percent, citing the need to prevent artificially inflated demand among its reasons. To address supply constraints, the government is also increasing supplies of 13 major holiday products, including apples, pears and Korean beef, to 163,000 tons, or 1.6 times normal levels. The measures can provide immediate relief. But temporary discounts cannot by themselves resolve production losses from extreme weather or higher labor and distribution costs. When the subsidies expire, shoppers could face higher out-of-pocket costs even without a further rise in underlying prices. How households interpret those pressures will be an important part of Wednesday’s survey. Expectations for inflation over the following year held at 2.7 percent in August, below that month’s actual inflation rate of 3.1 percent. A rise in the September expectations reading could strengthen the case for continued tightening, even if confidence in household finances weakens. A broader recovery in semiconductor-related activity could eventually support domestic-demand industries and ease financial vulnerabilities, BOK officials said Tuesday. For now, policymakers must judge how far that recovery has traveled beyond chip factories and export accounts. AJP Takeaways - South Korea’s export boom has yet to translate evenly into household income, with wage gains heavily concentrated in the semiconductor-heavy electronics sector. - Chuseok shoppers continue to face high food and living costs even as the government expands discount support and holiday food supplies. - The Bank of Korea must weigh resilient growth and inflation pressures against rising borrowing costs and uneven household finances as it considers further rate increases. 2026-09-22 17:34:52
BOK in dilemma as rate hikes ease imbalances, raise default risks SEOUL, September 22 (AJP) – Back-to-back rate hikes are expected to accelerate deleveraging and ease financial imbalances but risk pushing delinquency rates higher, a Bank of Korea financial stability report said Tuesday, underscoring the central bank’s dilemma with two rate-setting meetings left this year. Monetary Policy Board member Jang Yong-sung said further rate increases would be calibrated against inflation, economic conditions and financial stability. The BOK raised its benchmark rate by 25 basis points in both July and August. Home prices in Seoul and surrounding areas have continued to climb, while expectations of further gains remain elevated and household borrowing could accelerate again, the central bank said. The BOK’s Financial Vulnerability Index (FVI) rose to 46.5 in the second quarter, marking a ninth consecutive quarterly increase. Deputy Governor Jang Jeong-su told a press briefing that the bank estimates the upward trend continued into the third quarter. The index combines 64 indicators covering credit, asset prices and financial institutions’ resilience to measure the buildup of medium- to long-term vulnerabilities. The Financial Stress Index (FSI), which tracks more immediate strains, edged up to 19.5 in August from 19.3 in July, remaining within the BOK’s caution range of 12 to 24. The FVI gauges vulnerabilities that could amplify an economic downturn when a shock occurs, while the FSI captures more immediate financial stress, said Lim Kwang-kyu, director general of the BOK’s Financial Stability Department. The simultaneous increase in both indicators warrants continued efforts to contain financial imbalances, he said. Higher interest rates can restrain borrowing and risk-taking and temper expectations of further housing gains. But rising debt-servicing costs can weaken borrowers with limited repayment capacity as existing loans mature or interest rates reset. The latest hikes should help ease financial imbalances while gradually increasing default risks among vulnerable borrowers, the report said. A 25-basis-point rate increase would add about 7 trillion won ($5.1 billion) to households’ and companies’ combined interest burden, Lim said. The BOK’s analysis found that household and corporate bank loan delinquency rates responded most strongly about 15 months after a rate increase. Vulnerable household borrowers and small and medium-sized companies showed their strongest response sooner, after roughly nine months. Officials declined to estimate how high delinquency rates could rise next year, saying economic conditions, lending restrictions and government support would also shape the outcome. The household loan delinquency rate across financial institutions edged down to 0.98 percent at the end of the second quarter from 1.00 percent three months earlier. The share of vulnerable borrowers nevertheless rose to 6.8 percent from 6.7 percent. Among self-employed borrowers, the delinquency rate climbed to 1.99 percent at the end of June from 1.86 percent at the end of 2025, exceeding its long-term average of 1.60 percent. The rate among vulnerable self-employed borrowers reached 12.71 percent. Corporate borrowers also showed signs of growing strain. Marginal firms — companies whose operating earnings failed to cover interest expenses for three consecutive years — accounted for 19.1 percent of externally audited companies in 2025, up 2 percentage points from a year earlier. The share reached 20.0 percent among small and medium-sized companies. By industry, it stood at 43.7 percent in real estate and 28.4 percent in accommodation and food services. Vulnerabilities have increased in domestic-demand industries and could translate into greater default risks if the economy faces an external shock, Lim said. Household debt relative to the size of the economy, meanwhile, has fallen sharply. The debt-to-GDP ratio declined to 85.3 percent at the end of the first quarter from 88.1 percent at the end of 2025 and was estimated at around 81 percent in the second quarter. The improvement largely reflected rapid nominal economic growth driven by surging semiconductor exports, the report said. The ratio could fall into the 70-percent range by year-end, below the 80-to-85 percent range at which household debt can begin to constrain economic growth, Jang Jeong-su said. He cautioned against easing debt controls because rapid nominal GDP growth had not translated into equally broad income gains across households. On currency markets, the BOK said the won’s recent appreciation did not yet appear excessive. The decline in the won-dollar exchange rate largely reflected a correction toward economic fundamentals rather than excessive market movement, said Kim Shin-young, head of the BOK’s Foreign Exchange Analysis Division. Officials said the speed of currency moves matters in either direction and that the central bank was monitoring for excessive one-way flows and would respond firmly if necessary. South Korea’s financial system remains broadly stable, supported by resilient financial institutions and sound external payment capacity, the report said. It assessed the overall burden of higher rates as manageable given improving economic conditions and financial institutions’ capacity to absorb losses. Housing, household debt, vulnerable borrowers and renewed financial and foreign exchange market volatility nevertheless remain key risks. The BOK called for monetary policy and macroprudential measures to work together to contain financial imbalances, alongside targeted fiscal and financial support for vulnerable borrowers. AJP Takeaways - Back-to-back rate hikes could ease housing and debt pressures while increasing default risks among vulnerable borrowers. - A 25-basis-point increase would add about 7 trillion won to household and corporate interest burdens, a BOK official said. - Delinquency rates responded most strongly about 15 months after a rate increase, compared with roughly nine months for vulnerable households and smaller companies. 2026-09-22 11:44:03
Trump-Xi summit puts Korea's won, bonds on yuan-Treasury watch SEOUL, September 21 (AJP) - The Trump-Xi summit this week will put South Korea's won and bond markets on watch for two signals with an outsized influence on Seoul, the direction of China's yuan and the appetite for U.S. government debt. The won closed Monday at 1,381.0 per dollar, 2.3 won stronger than Friday, while China's yuan strengthened as far as 6.6957 per dollar, its strongest level in more than three and a half years. U.S. Treasury yields remain near levels that have unsettled global debt markets, with the benchmark 10-year yield having breached 5 percent last week amid renewed inflation concerns, expectations for further Federal Reserve tightening and worries over America's mounting debt burden. South Korean markets are therefore exposed on both fronts as U.S. President Donald Trump and Chinese President Xi Jinping prepare to meet in Washington on Sept. 24. For the foreign-exchange market, the immediate link runs through the yuan. The Bank of Korea found in a 2025 Issue Note that the Korean won had the highest degree of co-movement with the Chinese currency among 33 currencies examined. The relationship weakened structurally after 2020 as Korea-China trade ties shifted and global supply chains were reorganized, but the BOK found the correlation had begun moving back toward its long-term average. More importantly for markets, the relationship is asymmetric. The won has historically moved more closely with the yuan when both currencies are weakening against the dollar than when they are appreciating, according to the BOK. A summit outcome that reverses the yuan's recent strength would therefore carry particular weight for Seoul. The Chinese currency strengthened to 6.6957 per dollar Monday after the People's Bank of China allowed its daily fixing to move closer to market expectations, easing resistance to appreciation ahead of the summit. A continuation of the trend could provide some support for North Asian currencies. A renewed yuan decline, particularly if driven by trade friction or disappointment over the summit, would provide a more direct test of the won-yuan linkage identified by the BOK. The won's movement would not be automatic. Korea-specific factors, including semiconductor exports, exporter dollar selling, domestic interest rates and foreign investment flows, continue to influence the currency independently. The BOK's findings nevertheless suggest the yuan remains one of the more important external variables for the won, particularly during bouts of dollar strength and risk aversion. The second link runs through Washington's debt market. U.S. federal debt has surpassed $40 trillion, while higher inflation and expectations for further Fed tightening have pushed Treasury borrowing costs sharply higher. The 10-year Treasury yield climbed above 5 percent last week for the first time since 2023. Foreign demand for Treasuries has become increasingly important as Washington continues to issue large volumes of debt. China remains one of the biggest foreign holders of U.S. government securities, although its holdings have been falling. Mainland China's Treasury holdings declined to $618 billion at the end of July from $633.4 billion in June and $695.6 billion a year earlier, according to U.S. Treasury Department data. Japan and the United Kingdom now hold substantially more. There has been no public indication that Chinese purchases of Treasuries are formally on the Sept. 24 summit agenda. The publicly identified subjects center on trade, tariffs, purchases of U.S. goods, technology restrictions, artificial intelligence, critical minerals and geopolitical issues. Beijing is seeking relief from some technology curbs, while Washington is pressing for additional Chinese purchases of American goods. Bond investors, however, will also watch for any signal that could affect China's willingness to hold U.S. assets. An increase in Chinese Treasury demand, or even a slower reduction in its holdings, would tend to support bond prices and ease upward pressure on yields. Further reductions could add to concerns over demand at a time when U.S. borrowing needs are high. The transmission matters directly for Seoul. A Bank of Korea working paper released Sunday found that co-movement between Korean and U.S. long-term interest rates increased sharply during major global shocks. The study found global inflation was the single largest contributor to the relationship, while Federal Reserve policy was another significant source of Korea-U.S. yield co-movement. External shocks were transmitted to Korean long-term yields mainly through expectations for future monetary policy rather than changes in risk compensation. The Korean bond market entered summit week already caught between those forces. The three-year Korean government bond yield rose 2.1 basis points to 4.056 percent at Monday's close, while the 10-year yield fell 0.9 basis point to 4.457 percent. The movements followed another volatile week in global debt markets after the Federal Reserve raised its benchmark rate by 25 basis points to 3.75-4.00 percent and signaled scope for further tightening. The summit therefore presents Seoul with two connected market tests. Currency traders will watch whether the yuan can sustain its advance or turns lower after Trump and Xi meet, with the latter scenario historically posing the greater risk of pulling the won with it. Bond investors will focus on whether the summit changes expectations for U.S. inflation, trade, fiscal pressure or foreign demand for Treasuries enough to move American yields. No formal currency or debt agreement would be required for the summit to matter for Korea. A shift in the yuan can travel quickly into the won, while a repricing of U.S. Treasuries can pass through to Korean long-term borrowing costs. For Seoul markets, the most consequential outcome may ultimately be reflected in the price of China's currency and America's debt. AJP Takeaways - The won closed Monday at 1,381.0 per dollar as the yuan reached 6.6957, its strongest level in more than three and a half years ahead of the Sept. 24 Trump-Xi summit. - The BOK found the won has the strongest co-movement with the yuan among 33 currencies, with synchronization particularly strong when the two currencies are depreciating. - China's U.S. Treasury holdings fell to $618 billion in July as U.S. federal debt surpassed $40 trillion and the benchmark 10-year Treasury yield moved around 5 percent. - A separate BOK study found strong Korea-U.S. long-term yield co-movement during global shocks, making Treasury yields a key transmission channel into the Korean bond market. 2026-09-21 17:03:16
Chip rebound deepens South Korea's reliance on exports SEOUL, September 21 (AJP) - Exports made up a larger share of South Korea's economy in 2024 as the recovery in the semiconductor industry helped boost manufacturing, according to data by the Bank of Korea (BOK) released on Monday. The central bank said exports accounted for 16.1 percent of total demand, which covers both intermediate materials used in production and finished goods and services, up from 14.7 percent in 2023. Of all spending on finished goods and services, the share going to exports rose to 31.8 percent from 29.4 percent. The BOK attributed the increase largely to stronger exports of computers, electronic and optical products, including semiconductors. Merchandise exports continued to rise, reaching a record $709.7 billion in 2025, up 3.8 percent from a year earlier and surpassing $700 billion for the first time. From Jan. 1 through Sept. 20, 2026, exports totaled $765.0 billion, up 55.0 percent from the same period last year and already exceeding the full-year record set in 2025. August shipments rose 68.7 percent from a year earlier to $98.25 billion, while semiconductor exports jumped 209 percent over the same period. The more recent trade figures cover only merchandise exports and are not directly comparable with the broader, economy-wide export-share figures compiled by the central bank. Manufactured goods accounted for 26.0 percent of total value added in 2024, up from 25.0 percent a year earlier. The service sector's share fell to 64.1 percent from 65.4 percent over the same period, reversing the increase recorded in 2023. Assembly-processed products, including computers, electronic and optical equipment, electrical equipment, machinery and transport equipment, increased their share of value added to 12.2 percent from 10.5 percent. The economy-wide value-added ratio rose to 42.0 percent from 41.2 percent in 2023, helped by higher operating surpluses in manufactured exports. Dependence on imported intermediate inputs eased to 13.3 percent from 13.6 percent as import prices for raw materials continued to decline. The share of production induced by exports rose to 35.1 percent in 2024 from 32.7 percent a year earlier, while their share of induced value added increased to 28.2 percent from 25.4 percent. Exports accounted for 22.2 percent of employment induced by final demand, up from 20.7 percent in 2023. Total full-time-equivalent employment nevertheless fell by 28,000 to 25.96 million, with declines concentrated in construction and agriculture, forestry and fisheries. Permanent employment increased by 60,000, while temporary and daily workers fell by 55,000 and self-employed and unpaid family workers declined by 33,000. Services accounted for 36.4 percent of intermediate inputs in 2024, up from 35.4 percent a year earlier, led by producer services including information and communications, finance and insurance and professional services. Services also accounted for 72.0 percent of full-time-equivalent employment, compared with 71.7 percent in 2023. AJP Takeaways - South Korea's exports accounted for 16.1 percent of total demand in 2024, up from 14.7 percent in 2023 as semiconductor-related exports increased sharply. - Manufactured goods increased their share of South Korea's value added to 26.0 percent from 25.0 percent, while exports accounted for larger shares of production, value added and employment induced by final demand. - South Korea's merchandise exports subsequently reached a record $709.7 billion in 2025 and exceeded that full-year total by Sept. 20, 2026, although the trade figures are not directly comparable with the BOK's input-output measures. 2026-09-21 15:09:10
Yen-backed stablecoin soars after Upbit debut SEOUL, September 21 (AJP) - Trading in yen-pegged stablecoin JPYC jumped about 200-fold after its listing on South Korea's Upbit exchange, with blockchain transfers and new issuance also surging, industry data showed on Monday. JPYC trading volume reached 45.1 billion won (US$32.49 million) last Saturday, compared with a daily average of $163,020 during the roughly 11 months before the token was listed, according to CoinGecko. The turnover was also more than 500 times the $64,570 recorded on Sept. 16, a day before Upbit began supporting JPYC trading. JPYC transfers increased 83.3-fold when the 24 hours after Upbit's listing announcement were compared with the preceding 24 hours, according to an analysis by Cho Jae-woo, head of Hansung University's Blockchain Research Institute. Transaction counts rose 26.4 times, active wallets increased 12.6 times and newly active wallets climbed 22.4 times over the same comparison period. About 973 million of the 3.69 billion JPYC newly issued on Ethereum after the listing, or 26.4 percent, flowed into Upbit. Around 80 percent to 90 percent of those inflows moved from decentralized exchanges through individual wallets before reaching Upbit deposit wallets. Some of the flows reflected arbitrage between decentralized exchanges and the Korean market, Cho said, as investors sought to take advantage of price differences following the listing. JPYC is designed to track the Japanese yen, but its Korean price briefly moved far above that level immediately after trading began. The token started trading at 12 won on Upbit on Sept. 17 and climbed to as high as 37.6 won, while it was trading in the 8-won range overseas at the time. The price returned to around the global market level after Upbit expanded deposit support and more tokens became available for trading. Market participants attributed the temporary gap mainly to limited initial liquidity and concentrated buying demand rather than a change in the underlying value of the yen. The surge came as Korean regulators were already examining how offshore-issued stablecoins are being used domestically. The Financial Services Commission's Financial Intelligence Unit and the Financial Supervisory Service have been reviewing services that allow tokens including JPYC to be used to purchase Korean mobile gift certificates, citing potential money-laundering concerns. Authorities are also considering rules governing the domestic distribution of offshore stablecoins as part of the country's second-stage digital asset legislation. Separately, the Bank of Korea (BOK) has been studying how stablecoin markets could become linked with conventional foreign exchange markets as Korea's digital asset market develops. A Sept. 3 BOK Issue Note found that stablecoin demand was more likely to be transmitted into exchange rates when global intermediaries could directly access both fiat currency and stablecoin markets. In a report released on Sept. 3, the Bank of Korea (BOK) said that stablecoin demand was more likely to be transmitted into exchange rates when global intermediaries could directly access both fiat currency and stablecoin markets. In South Korea, where the won lacked the direct global exchange trading pairs examined in the study, stablecoin buying pressure was reflected mainly in higher local premiums rather than a statistically significant change in the won-dollar exchange rate. The BOK said such linkages could strengthen if corporations and foreign investors gain wider access to the country's digital asset market, but the study focused on dollar stablecoins and does not show that the recent JPYC surge affected the won-yen or won-dollar exchange rates. AJP Takeaways - JPYC trading volume reached $32.49 million on Sept. 19, about 200 times its daily average before the Upbit listing and more than 500 times the level recorded three days earlier. - JPYC blockchain transfers rose 83.3-fold around the listing announcement, while newly issued tokens flowed rapidly into Upbit through decentralized exchanges and private wallets. - South Korean regulators were already reviewing the domestic use of offshore stablecoins, while the BOK has separately studied how stablecoin markets could become more closely linked with conventional foreign exchange markets. 2026-09-21 13:52:02
South Korea's exports jump in 1st 20 days of September as chip boom continues SEOUL, September 21 (AJP) — South Korea's exports surged 78.3 percent from a year earlier to a record US$71.4 billion in the first 20 days of September, according to preliminary data released by Korea Customs Service on Monday. Imports climbed 26.7 percent from the same period last year to $48.4 billion, leaving a trade surplus of nearly $23.0 billion. Average daily exports rose 89.8 percent from a year earlier to $4.61 billion despite 15.5 working days during the period, one fewer than a year earlier. The tally was about 15.7 percent above the previous record of $61.7 billion set in June for the first 20 days of a month. August exports had already jumped 68.7 percent from the same month last year to $98.25 billion, marking the third straight month that shipments exceeded $90 billion. Semiconductor exports more than tripled to a record $34.1 billion in the Sept. 1-20 period, rising 259.4 percent from the same period in 2025. They accounted for 47.8 percent of all outbound shipments, up 24.1 percentage points from a year earlier. The increase in semiconductor shipments accounted for about 79 percent of the $31.4 billion rise in total exports from the same period last year. Still, exports excluding semiconductors grew 22.0 percent from a year earlier, showing that the gains extended beyond the chip sector. Non-semiconductor exports had risen about 25.8 percent from a year earlier during Sept. 1-10, when overall exports jumped 82.6 percent and chip shipments soared 270.1 percent. Among other major products, petroleum-product exports increased 47.8 percent from a year earlier, while ship exports rose 63.0 percent. Passenger-car shipments gained 9.3 percent over the same period. Exports of computer peripherals surged 187.6 percent compared with the same period last year, while wireless communication devices, auto parts, precision instruments and home appliances declined. Shipments to China rose 113.8 percent from a year earlier to $16.6 billion, while exports to the U.S. jumped 118.0 percent to $14.2 billion. Exports to Viet Nam increased 44.8 percent from the same period last year to $5.87 billion, while shipments to Taiwan surged 128.5 percent and those to the European Union rose 37.0 percent. China, the U.S. and Viet Nam together accounted for 51.4 percent of total exports during the period. On the import side, semiconductor purchases rose 88.8 percent from a year earlier, while imports of semiconductor manufacturing equipment climbed 55.6 percent. Crude-oil imports increased 37.3 percent compared with the same period last year, pushing combined imports of crude oil, gas and coal up 27.9 percent. Exports totaled $765.0 billion from the start of the year through Sept. 20, up 55.0 percent from the same period last year. Imports increased 19.5 percent from a year earlier to $539.4 billion, resulting in a cumulative trade surplus of $225.6 billion. The customs agency cautioned that the figures cover only the first 20 days of the month and may be affected by differences in working days and the timing of customs clearances. AJP Takeaways - South Korea's exports surged 78.3 percent from a year earlier to a record $71.4 billion in Sept. 1-20, while average daily shipments climbed 89.8 percent despite one fewer working day. - Semiconductor exports jumped 259.4 percent from a year earlier to $34.1 billion and accounted for nearly four-fifths of South Korea's total export increase, while non-chip shipments grew 22.0 percent. - Non-semiconductor exports rose about 25.8 percent from a year earlier during Sept. 1-10 and maintained growth of more than 20 percent through Sept. 20, while South Korea's exports to both China and the U.S. more than doubled. 2026-09-21 10:13:33